(Kitco News) – A potential ceasefire in the Israel-Hamas conflict has added further downside pressure to gold and silver prices, which were already weakening under U.S. dollar strength and high bond yields, according to City Index market analyst David Scutt.
“Gold and silver stumbled out of the blocks this week, with a surging US dollar, elevated bond yields, and renewed hopes for a Middle East peace deal likely contributing to Monday’s sharp falls,” Scutt wrote. “Lopsided short-term positioning after a strong start to the year may have amplified the reversal, especially in silver.”
Scutt noted that both precious metals enjoyed a strong start to 2025 despite the stronger US dollar and rising Treasury yields.
“Historically, such conditions would be toxic for non-yielding assets priced in dollars,” he said. “However, concerns over the US inflation outlook may explain gold’s resilience, with bullion showing a modest correlation (~0.7) with US 10-year inflation breakevens and front-month WTI crude oil futures over the past fortnight. While not a perfect relationship, it’s one worth monitoring given recent inflation-linked unease across markets.”
While Monday’s sell-off ended the metals’ bullish run, Scutt said the technical picture for gold remains positive. [Gold] sits in an established uptrend and continues to trade above the key 50-day moving average, an important level often respected in recent years,” he said. “RSI (14) and MACD are providing bullish signals, making the inclination to buy dips over selling rallies.”
“The break above $2676.50 on Friday didn’t stick, and while Monday’s candle is not a bearish engulfing, it would not surprise to see some further near-term weakness as we near key events such as the US inflation report for December on Wednesday,” Scutt added. “Given the backdrop, a potential retest of the 50-day moving average should be on the radar for those looking to buy dips. If the price were to bounce off the level it would provide a decent bullish setup, allowing for positions to be established above with a tight stop beneath for protection.”
He noted that even though Monday’s price action didn’t respect it, $2,676.50 remains an important level as it has acted as both support and resistance on multiple occasions so far in 2025.
“Above, Friday’s high around $2698 looms as one potential target with $2725 after that,” Scutt wrote. “If gold were to close beneath the 50-day moving average, it may pay to see if and how the price interacts with the November uptrend when evaluating possible setups.”
The technical picture for silver, on the other hand, is decidedly negative. “The price action in silver has been far more bearish with the sharp pullback delivering a textbook bearish engulfing candle on the daily timeframe, seeing it slide below the 200-day moving average,” he said. “RSI (14) broke its uptrend with conviction, signalling shifting momentum risks even if not yet confirmed by MACD.”
Scutt pointed to $29.50 as a key level to watch for silver, given the price has traded on either side of it over recent weeks.
“If silver were to close beneath this level, it would create a bearish setup, allowing for shorts to be established below with a stop above for protection. $28.75 – the low set on December 19 – looms as an initial target,” he noted. “Alternatively, if the price continues to bounce off $29.50, the setup could be flipped with longs established above with a stop beneath for protection. $29.87 and 200-day moving average are potential initial targets with a break above increasing the risk of a retest of the 50-day moving average.”
Gold prices have seen considerable volatility in Tuesday trading, . Spot gold last traded at $2,671.67 per ounce for a gain of 0.32% on the session.
Silver has posted a stronger recovery today after its sharp drop during Monday’s trading session. At the time of writing, spot silver last traded at $29.911 per ounce, and is up 0.98% on the daily chart.
